The Financial Conduct Authority is readying itself for a fresh crackdown on the industry as it warned some authorised firms and insolvency practitioners have attempted to unlawfully sell client data to claims management companies.
The warning was sounded in a joint statement issued alongside the Information Commissioner's Office and the Financial Services Compensation Scheme today (February 7), in which the regulator's patience appeared to wane with some data sharing practices in the industry.
According to the watchdog the sale can happen either before or after a firm has gone into administration and where it is likely claims for compensation will be made to FSCS.
The FCA warned: "The terms, conditions and clauses within a standard contract are highly unlikely to constitute sufficient legal consent for personal data to be shared with CMCs to market their services, and may not be lawful."
It also said by passing on personal data companies could be failing to meet their obligations under the Data Protection Act and the General Data Protection Regulations.
The FCA said it was aware some companies had attempted to unlawfully sell client data, meaning any subsequent marketing calls, texts or emails sent by CMCs would also be in breach of privacy rules.
In July last year it warned CMCs over data belonging to clients of failed mini-bond provider London Capital & Finance, saying they would face regulatory action if they failed to legally process the data.
Today the watchdog said: "CMCs are required to act honestly, fairly and professionally in line with the best interests of their customers, as required by the FCA Handbook.
"CMCs using such personal data may not be acting in the customers' interests. CMCs seeking to rely on legitimate interest grounds for processing such data are highly unlikely to meet the requirements of the GDPR."
Any CMCs which intend to buy and use personal data must be able to demonstrate how they considered the "fair treatment of customers" in compliance with privacy laws, the FCA warned.
In partnership with the ICO, the FCA pledged to take further action against any firms in breach of data protection rules.
Since taking over responsibility for regulating CMCs last year, the FCA has warned the sector on unacceptable advertising and highlighted low uphold rates could work against companies when it comes to authorisation.
What do you think about the issues raised by this story? Email us on email@example.com to let us know.